Fed’s new voting lineup likely won’t alter policy

Thursday

Jan 31, 2013 at 6:00 AM

By Martin Crutsinger THE ASSOCIATED PRESS

The Federal Reserve said Wednesday that the U.S. economy “paused” in recent months because of temporary factors and reaffirmed its commitment to try to stimulate growth by keeping borrowing costs low for the foreseeable future.

Yet the two-day meeting proved an opportunity to see where four new voting members stand. The rotation of the Fed’s roster of voting members occurs at the start of each year. All 19 officials on the policy committee take part in the meetings, which are held eight times a year. But only 12 get to vote.

Chairman Ben Bernanke and the six other members of the Fed’s board in Washington keep their votes. So will William Dudley, president of the Federal Reserve Bank of New York. All have permanent votes. But among the presidents of the 11 other Fed regional banks, four lost the vote and four gained them.

The Fed took no new action at its two-day policy meeting, and it stood behind aggressive steps it launched in December to try to reduce unemployment, in a statement released after the meeting.

In its statement, the Fed said, “Economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors.”

The statement was approved on an 11-1 vote.

Last year, Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, was the lone dissenter at each of the eight meetings. Lacker said he thought the job market was being slowed by factors beyond the Fed’s control. He also argued that further bond purchases would risk worsening future inflation.

With Lacker no longer a voting member, the Fed’s policy decisions might be unanimous. But it isn’t certain. The one official most likely to dissent this year from the Fed’s easy-credit policies is Esther George, president of the Federal Reserve Bank of Kansas City.

Like Lacker, George is known as a “hawk.”

And she did cast the lone dissenting vote Wednesday, concerned about the risk of higher inflation caused by the Fed’s aggressive policies.

Among economists and Fed-watchers, hawks are those who tend to worry that interest rates kept too low for too long could escalate inflation or fuel asset bubbles. By contrast, “doves” place a higher priority on boosting the economy and reducing unemployment.

Although the cast of voting members on the Federal Reserve’s policy committee changed, Chairman Ben Bernanke will likely retain a solid majority on the 12-member committee for his drive to keep interest rates low well into the future, despite critics who worry about the risks.

The three other regional bank presidents who are gaining votes this year are Charles Evans of the Chicago Fed, Eric Rosengren of the Boston Fed and James Bullard of the St. Louis Fed.

Bullard’s views are seen as middle of the road. But some analysts suggest that after George, Bullard would be most likely to dissent from a Fed vote out of concern that its policies might trigger high inflation.

By contrast, Evans is considered the Fed’s most dovish official. Last year, Evans persuaded his fellow committee members to change the way the Fed provides guidance on its interest-rate policies to investors, consumers and businesses.

In December, the Fed scrapped the calendar dates it had been using as targets and said it would link its actions to specific economic markers.